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POL prices hiked to protect revenues

The federal cabinet on Tuesday gave ex-post facto ap-proval for up to 66% increase in petroleum product prices that Prime Minister Imran Khan consciously decided to enforce from last week of June to protect nearly Rs8 bil-lion worth of revenues. The federal cabinet approved a summary of the Ministry of Finance to endorse the prime minister’s decision to increase the petroleum prices with ef-fective from June 26. The gov-ernment had to secure the cabinet’s nod as it increased the prices without following the laid-down procedures to protect its revenues. The cabinet also approved the appointment of Rahat Kaunain Hasan as new chair-person of the Competition Commission of Pakistan (CCP). She has already worked with the adviser to prime minister on finance as the CCP chairperson during Shaikh’s last stint as the fi-nance minister (2010-13). Some cabinet ministers op-posed appointment of Rahat as CCP member and chairperson due to allegations of nepotism during her last stint as chair-person, sources told The Express Tribune. But PM’s Secretary Azam Khan informed the cabinet that nothing could be proved against her in an in-
quiry, said the sources. On June 25, the finance min-istry had recommended the prime minister that due to increase in petroleum prices in international market, the prices have to be increased for the domestic market, accord-ing to the cabinet documents. The finance ministry’s sum-mary noted that as per oil pricing formula, the prices of petrol, high speed diesel and light diesel oil are changed automatically but capped with Pakistan State Oil’s (PSO) last month average price, being monitored by the Oil and Gas Regulatory Authority (Ogra) while the price of kerosene oil is fully regulated by the Ogra. Therefore, prior to the price announcement, Ogra verifies the PSO’s prices and sends ex-depot sale price summary of the petroleum products to the Petroleum Division for onward submission to the Finance Division, for final adjustment in the prices through petro-leum levy. However, in this case Ogra had not moved the summary and the government increased the petrol prices by Rs25.58 to Rsioo, high speed diesel by Rsz1.31 to Ram. 46, kerosene oil by Rs23.5o to Rs59.o6 and light diesel oil by Rs17. 84 to Rs56 per litre. This created a huge hue and cry among the people and the political parties but the gov-emment remained steadfast.

L. OPTIONS: Finance Division had proposed some relief either by reducing the petroleum levy, increasing prices from July 1 or spreading the increase over 36 days, Num nit

The Petroleum Division’s working suggested that based on the last average price, the petrol price was Rsio6 and high speed diesel rates came to Rs-10446 per litre. The working had been done without compromising the tax rates that are currently at the maximum and in case of the petroleum levy the high-est ever. The ex-depot sale price of petroleum products is based on previous month import price and other compo-nents including inland freight equalisation margin, oil mar-keting companies and dealers’ margin, customs duty, petro-
leum levy and 17% CST. The Finance Division had proposed the prime minister to provide some relief in prices of petrol and high speed diesel ei-ther by reducing the petroleum levy rates and increase the prices from July i or spread the increase to 36 days to protect the maximum petroleum levy rates. The finance ministry’s proposal was that some relief can be provided “by reduction in petroleum levy rates which have already touched the max-imum level of Rs3o per litre, if this does not impact the gov-emment of Pakistan’s revenue target. Under this scenario,
the prices will be effective from July 1, zozo. The petroleum levy will be reduced by Rs7.8 billion in July 2020. The second option was that “the increase may be spread over a large period for next 36 days (June 26 to July 31) but at a lesser rate. In order to implement it, the Petroleum Division has proposed that change may be made in the rates immediately tonight”. The PM picked the option of increasing the rates from June 26 without reducing the petro-leum levy rates. The PM was told that in case of spreading the increase over

36 days, the OMC5/ refiner-ies will recover less revenue in July zozo, more revenue in remaining five days of June. The other benefit the gov-emment achieved by increas-ing prices from June 26 was to end speculation, which it otherwise could not have done due to its weak governance. The federal cabinet also ap-proved to appoint three new members of the CCP and Rahat Kaunain Hasan has been ap-pointed as chairperson. A ministerial committee had unanimously recommended the panel of nine persons in the order of merit for appoint-ment against three vacant posts of the member CCP. Rahat Kaunain Hassan, Shomaila Loan, Mueen Batlay, Samir Ahmed, Mohammad Bilal, Salman Amin, Mujtaba Ahmed Lodhi, Ikramul Hague Qureshi and Khaqan Hasan Najeeb. The federal cabinet decided to pick first two names, Rahat Kaunain and Shomaila than, in order of merit and ignored the third name of Mueen Batley. Instead it approved number seventh on merit list, Mujtaba Ahmad Lodhi as the third CCP member. Khaqan Hasan Najeeb, who had remained director general of institutional reforms unit of the finance ministry for about 10 years was at the bot-tom of the merit list.

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